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Cadence Reports First Quarter 2014 Financial Results
SAN JOSE, Calif. , 21 Apr 2014

Click here for the Q1 2014 Financial Schedules.

Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter of fiscal year 2014.

Cadence reported first quarter 2014 revenue of $379 million, compared to revenue of $354 million reported for the same period in 2013. On a GAAP basis, Cadence recognized net income of $33 million, or $0.11 per share on a diluted basis, in the first quarter of 2014, compared to net income of $79 million, or $0.27 per share on a diluted basis, in the same period in 2013. GAAP net income for the first quarter of 2013 included a $34 million income tax benefit due to a release of an uncertain tax position.

Using the non-GAAP measure defined below, net income in the first quarter of 2014 was $59 million, or $0.20 per share on a diluted basis, as compared to net income of $61 million, or $0.21 per share on a diluted basis, in the same period in 2013.

“In Q1, Cadence continued to strengthen its product portfolio through internally developed products and key acquisitions,” said Lip-Bu Tan, president and chief executive officer. “We advanced our functional verification platform by releasing our new Incisive® vManager™ solution and acquiring Forte Design Systems. And today, we announced that we entered into a definitive agreement to acquire Jasper Design Automation, Inc., which will meaningfully add to our verification capabilities. We also continued to see strong customer interest and growing adoption of our digital and new sign-off products with multiple design wins.”

“Cadence produced solid operating results in Q1 while continuing to invest strategically to further our growth objectives,” added Geoff Ribar, senior vice president and chief financial officer.

Business Outlook
For the second quarter of 2014, the company expects total revenue in the range of $370 million to $380 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.10 to $0.12. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.19 to $0.21.

For 2014, the company expects total revenue in the range of $1.550 billion to $1.590 billion. On a GAAP basis, net income per diluted share for 2014 is expected to be in the range of $0.56 to $0.66. Using the non-GAAP measure defined below, net income per diluted share for 2014 is expected to be in the range of $0.92 to $1.02.

The foregoing statements regarding the company's business outlook do not take into account the pending acquisition of Jasper Design Automation, Inc.

A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is also included with this release.

Audio Webcast Scheduled
Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a first quarter 2014 financial results audio webcast today, April 21, 2014, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting April 21, 2014 at 5 p.m. (Pacific) and ending June 13, 2014 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.


About Cadence
Cadence enables global electronic design innovation and plays an essential role in the creation of today’s integrated circuits and electronics. Customers use Cadence® software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at www.cadence.com.

The statements contained above regarding Cadence’s first quarter 2014 financial results and Cadence's expected benefits of the pending acquisition of Jasper Design Automation, Inc., as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, are or include forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence’s efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence’s products; (iv) change in customer demands, including those resulting from consolidation among Cadence’s customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence’s products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence’s ability to access capital and debt markets; (viii) failure or inability to consummate the acquisition of Jasper, the effects of the acquisition of Jasper on Cadence's financial results, the effect of regulatory approval requirements, the potential inability to successfully operate or integrate Jasper’s business, including the potential inability to retain customers, key employees or vendors; (ix) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (x) the effects of Cadence’s efforts to improve operational efficiency on Cadence's business, including strategic, customer and supplier relationships, and its ability to retain key employees; (xi) events that affect the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xii) the effects of any litigation or other proceedings to which Cadence is or may become a party.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the Securities and Exchange Commission. These include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.  

GAAP to Non-GAAP Reconciliation
To supplement Cadence’s financial results presented on a generally accepted accounting principles, or GAAP, basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, executive severance costs, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence’s management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company’s core business operations and therefore provides useful supplemental information to Cadence’s management and investors regarding the performance of the company’s business operations, facilitates comparisons to the company’s historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence’s management also uses non-GAAP net income internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are encouraged to look at the GAAP results as the best measure of financial performance.

The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

Net Income Reconciliation Three Months Ended
  March 29, 2014 March 30, 2013
(in thousands) (unaudited)
Net income on a GAAP basis $33,070 $78,609
Amortization of acquired intangibles 12,786 7,598
Stock-based compensation expense 18,864 13,810
Non-qualified deferred compensation expenses 2,063 152
Restructuring and other charges (credits) 396 (148)
Integration and acquisition-related costs 7,118 4,935
Amortization of debt discount 4,209 5,536
Other income or expense related to investments and non-qualified deferred compensation plan assets* (3,609) (990)
Income tax benefit due to a release of an uncertain tax position - (33,719)
Income tax effect of non-GAAP adjustments (15,510) (15,146)
Net income on a non-GAAP basis $59,387 $60,637

* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

Diluted Net Income per Share Reconciliation Three Months Ended
  March 29, 2014 March 30, 2013
(in thousands, except per share data) (unaudited)
Diluted net income  per share on a GAAP basis $0.11 $0.27
Amortization of acquired intangibles 0.04 0.03
Stock-based compensation expense 0.06 0.05
Non-qualified deferred compensation expenses 0.01 -
Restructuring and other charges (credits) - -
Integration and acquisition-related costs 0.02 0.02
Amortization of debt discount 0.02 0.02
Other income or expense related to investments and non-qualified deferred compensation plan assets* (0.01) (0.01)
Income tax benefit due to a release of an uncertain tax position - (0.12)
Income tax effect of non-GAAP adjustments (0.05) (0.05)
Diluted net income per share on a non-GAAP basis $ 0.20 $0.21
Shares used in calculation of diluted net income per share —GAAP** 301,034 292,151
Shares used in calculation of diluted net income per share —non-GAAP** 301,034 292,151

* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning June 13, 2014, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company’s current expectations. During the Quiet Period, the business outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until the day when Cadence’s second quarter 2014 earnings release is published, which is currently scheduled for July 21, 2014.

For more information, please contact:
Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com

Media and Industry Analysts
Anna del Rosario
Cadence Design Systems, Inc.
408-914-6884
newsroom@cadence.com


Cadence, the Cadence logo, Forte, Incisive and vManager are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.